February 02, 2008

February 3, 2008: Claymore Shutters Eleven Funds. Good.

ETF-sensitive media reports are mourning the death of eleven Claymore ETF Funds. I am surprised that ardent media capitalists are expressing a Soviet-style view of the prudent decision to liquidate failed funds. Claymore made a smart move to jettison these stinkers, and the ETF industry is the better for it.

Claymore and just about every other ETF producer has been introducing both conservative and eclectic product for years. For the most part, these ETFs have been relatively successful. However, it is obvious that more than a few ETFs have become duplicitous within index areas and downright bizarre in other parsed sectors. I have no quarrel with being either bizarre ot duplicitous if it works for the company that sponsors the fund. If it does not work, the Soviet approach is to maintain it regardless of worth. The capitalist approach is to acknowledge failure and go on to another idea that is better received and profitable. Readers with an appreciation of Capitalism 101 should relate to survival of the fittest. Stalin would have had the executives of Claymore shot on the spot and all other employees of Claymore sent to Siberia, probably to begin a startup venture to be called Enron.

No, the demise of eleven dwarfs is not a bad signal for the ETF industry. On the contrary, it is the free market of choice that is dictating what investors will gravitate towards. More ETF products will continue to be introduced. Most will survive and prosper.Some will be discarded upon the garbage dump of unprofitableinvestment ideas - along with the thousands of worthless securities from bygone eras.